Council Programs Prevent Implementation Of Market Barrier To U.S. Corn In South Korea

In 2017, the Korea Feed Association (KFA), which accounts for about 70 percent of the imports of corn for feed in the Korean market, attempted to amend its purchasing contracts to impose financial penalties to traders based on corn quality results for corn vessels arriving in South Korea. This change would have imposed a penalty equal to 0.5 percent of the invoice value for every 1 percent exceeding 10 percent of broken corn and foreign material (BCFM) from the imported corn starting Aug. 1, 2017. This convention is counter to how grain is traded internationally, which is based on quality at loading.

It was clear the amendment would be a critical obstacle to expand U.S. corn market in South Korea, where the average BCFM ratio of U.S. origin has been relatively higher compared to other competitors. Buyers would have favored other origins for corn simply to reduce the uncertainty of financial risk that could be incurred when vessels arrived in South Korea.

Using Foreign Market Development (FMD) funds, the U.S. Grains Council (USGC) was able to prevent South Korean buying groups from applying new BCFM terms through timely and proactive marketing programs to educate the South Korean buyers about the detrimental impact of this new contract clause. Working in concert with the U.S. Department of Agriculture (USDA) and U.S. agribusinesses, the Council held education seminars on with the U.S. Federal Grain Inspection Service (FGIS) on grain grading and inspection standards. In addition, a team of South Korean buyers traveled the United States to get a better understanding of how the U.S. grain merchandising systems works and how the new amendment would have a negative impact on Korea’s feed industry.

As a result of these interventions by the Council, the KFA dropped their proposed contract amendment, and no attempts have been made to impose this regulation on corn imports to South Korea.

The Council invested $84,000 of FMD funds to overcome the market barrier and as a result, not only did the Council defend existing U.S. corn market share, U.S. corn exports grew from 2.6 million metric tons (102 million bushels) to 5.6 million tons (220 million bushels). The growth of 3 million tons of U.S. exports in 2017 alone is valued at $528.6 million.

The return on investment (ROI) for this program was $6,292 per $1 of FMD invested.